Third Party Debt Collectors and Consumer Protection Laws

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Posted Dec 20, 2024

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Third party debt collectors are bound by consumer protection laws to ensure fair and transparent practices.

The Fair Debt Collection Practices Act (FDCPA) regulates the behavior of third party debt collectors, prohibiting tactics like harassment, false statements, and unfair practices.

Under the FDCPA, collectors are required to validate debts within five days of initial contact, providing written proof of the debt and the amount owed.

Debt collectors can only contact consumers between 8am and 9pm, unless the consumer has given permission for later contact.

Repayment and Debt

You have the right to control which debts your payments apply to. If a debt collector is trying to collect multiple debts, they must apply your payment to the debt you choose, and cannot apply it to a debt you say you don't owe.

A debt collector can report your debt to a credit reporting company, but they must first try to contact you about the debt. This can be done through a phone call or in-person conversation, or by mailing a letter or sending an electronic communication, such as a validation notice, and waiting for a reasonable amount of time, usually 14 days, in case it's returned as undeliverable.

What to Know About Repayment

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When you're making payments on multiple debts, you have control over where your money goes. You can choose which debt to apply your payment to, and a debt collector can't apply it to a debt you say you don't owe.

If you're dealing with a debt collector, they must take certain steps before reporting your debt to a credit reporting company. They need to either talk to you by phone or in person about the debt, or mail a letter or send an electronic communication about the debt and wait for a reasonable amount of time - usually 14 days - in case it's returned as undeliverable.

This means you have some protection against debt collectors reporting your debt without giving you a chance to respond.

Lawsuits and Garnishment

If a debt collector sues you, respond by the date specified in the court papers. You are allowed to respond either personally or through your attorney.

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Ignoring the lawsuit can result in a court order being issued against you, which can have serious consequences.

To respond to a debt collection lawsuit, you must do so by the specified date. If you ignore the lawsuit, you may lose the chance to fight a court order.

A debt collector can take money from your paycheck or bank account, but they must first sue you and get a court order, known as a garnishment.

Many federal benefits are generally exempt from court-ordered garnishment, including Social Security benefits, Supplemental Security Income benefits, and Veterans benefits.

Here are some examples of federal benefits that are generally exempt from garnishment:

  • Social Security benefits
  • Supplemental Security Income benefits
  • Veterans benefits
  • Federal student aid
  • Military annuities and survivors’ benefits
  • Benefits from the Office of Personnel Management
  • Railroad retirement benefits
  • Federal emergency disaster assistance

Debt Collection Laws and Regulations

Debt collection laws and regulations are in place to protect consumers from abusive and unfair practices by third-party debt collectors. The Fair Debt Collection Practices Act (FDCPA) is a federal law that regulates debt collection practices.

The FDCPA is enforced primarily by the Consumer Financial Protection Bureau, which can issue fines and penalties to debt collectors who violate the law. Aggrieved consumers can also file a private lawsuit to collect damages, including actual damages, statutory damages of up to $1,000, and reasonable attorney fees.

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Consumers have the right to sue debt collectors who violate the FDCPA, and can recover money for any injuries, up to $1,000 in additional damages, and attorneys' fees. This can be a powerful tool for consumers to hold debt collectors accountable for their actions.

Here are some key facts about debt collection laws and regulations:

  • The FDCPA prohibits debt collectors from using abusive, unfair, or deceptive tactics when trying to collect from you.
  • Debt collectors are also prohibited from harassing you, including calling you multiple times a day or calling you with the intent of harassing or annoying you.
  • Consumers have the right to send a "cease and desist" letter to debt collectors, which requires them to stop contacting you except to tell you that they're ending communications or that they might or will sue you.

The FDCPA applies to debts incurred primarily for personal, family, or household purposes, such as delinquent credit card accounts, overdue car loans, past-due medical bills, and defaulted student loans. However, the law does not cover business debts.

Consumer Debt Enforcement

If you're dealing with debt collectors, it's essential to know your rights. The Federal Trade Commission originally had the authority to enforce the Fair Debt Collection Practices Act (FDCPA), but now the Consumer Financial Protection Bureau is primarily in charge.

The FDCPA is a strict liability law, which means you don't need to prove actual damages to claim statutory damages of up to $1,000 plus reasonable attorney fees if a debt collector is proven to have violated the law. This can be a powerful tool for consumers who are being taken advantage of by unscrupulous collectors.

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Aggrieved consumers may file a private lawsuit in a state or federal court to collect damages from third-party debt collectors. The FDCPA also has a one-year statute of limitations, which starts tolling from the date of the alleged violation, not from the date the incident was discovered.

If you're considering filing a lawsuit, it's crucial to remember that you can't just do it for the sake of harassment. If the court determines that you filed the case in bad faith and for the purposes of harassment, they may award attorney's fees to the debt collector.

Debt collectors are also subject to regulations around the time of day they can call you. They must not contact you at any "unusual time" or at a time that they know or should know is inconvenient for you unless you agree otherwise. This means no calls before 8:00 in the morning or after 9:00 at night, unless there are special circumstances or your permission.

Consumer Protection Laws May Apply

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The Federal Trade Commission Act (FTCA) might also come into play if a creditor uses unfair or deceptive tactics to collect a debt. This could include calling you at an unreasonable hour.

Your state may have its own fair debt collection law that offers more protection to consumers. Some state laws cover creditors as well as collectors and specify additional types of behavior that violate state law.

You can find out the laws in your state by talking to a lawyer. This can help you understand your rights and options when dealing with debt collectors.

The Fair Debt Collection Practices Act (FDCPA) primarily applies to debt collectors, not original creditors. However, a creditor that collects its own debts under a different name must comply with this law.

State law might have requirements similar to the FDCPA for creditors, especially if they're debt buyers who regularly purchase and collect debts.

Entities Covered

The FDCPA applies to debt collectors, not creditors, unless the creditor collects its own debts under a different name or is a debt buyer with a principal purpose of collecting debts.

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Debt collectors are broadly defined as any person who uses interstate commerce or the mails to collect debts, or who regularly collects debts for others.

The FDCPA specifically excludes original creditors, but some states like California have similar consumer protection laws that regulate original creditors.

Attorneys are no longer exempt from the definition of a debt collector, unless they otherwise meet the definition.

The FDCPA only covers personal, family, or household transactions, excluding business debts.

The FDCPA does not apply to officers or employees of the United States collecting debts as part of their official duties.

Debt buyers that purchase and own the debt they're trying to collect might not be subject to the FDCPA, but this can depend on the circumstances.

Reporting and Stopping Debt Collectors

If you're dealing with a third party debt collector, you have options for reporting and stopping their actions. You can report any problems you have with a debt collector to your state attorney general's office, the Federal Trade Commission, or the Consumer Financial Protection Bureau. These agencies can help you determine your rights under state or federal law.

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If you think a debt collector broke the law, you can report them and also consider suing in a state or federal court. You have one year from the time the collector broke the law to file your lawsuit. If you can't prove damages, the judge can still award you up to $1,000, plus reimburse you for attorney's fees and court costs.

To stop debt collectors from contacting you, you can send a "cease and desist" letter to the collector. However, be aware that this doesn't make the debt disappear, and the collector can still take legal steps to collect the debt, including filing a lawsuit against you. Here are the agencies you can report debt collectors to:

  • State attorney general's office
  • Federal Trade Commission
  • Consumer Financial Protection Bureau

Understanding Old

Under the FDCPA, consumers have several options for reporting and stopping debt collectors. The Federal Trade Commission originally had authority to enforce the FDCPA, but now the Consumer Financial Protection Bureau does.

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You can file a private lawsuit in a state or federal court to collect damages from a debt collector. The FDCPA is a strict liability law, which means a consumer doesn't need to prove actual damages to claim statutory damages.

A debt collector can escape penalty if they show their violation was unintentional and the result of a "bona fide error". However, if the consumer loses the lawsuit and the court finds they filed in bad faith, the collector may be awarded attorney's fees.

The statute of limitations for FDCPA claims is one year, starting from the date of the alleged violation, not when the incident was discovered. This is according to the Supreme Court's ruling in Rotkiske v. Klemm (2019).

How to Report

If you're dealing with a debt collector who's being unfair or abusive, you have the right to report them. You can report any problems you have with a debt collector to your state attorney general's office, the Federal Trade Commission, or the Consumer Financial Protection Bureau.

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These organizations can help you determine your rights under your state's law and take action against the debt collector. Many states have their own debt collection laws, so it's essential to report any issues to your state attorney general's office.

If you think a debt collector broke the law, you have options beyond just reporting them. You can sue the collector in a state or federal court, but you must file your lawsuit within one year of when the collector broke the law.

If you win your lawsuit, the judge can award you up to $1,000, plus reimburse you for attorney's fees and court costs, even if you can't prove damages. However, even if a court finds a debt collector violated the FDCPA, you may still owe the debt.

Here are the organizations you can report debt collectors to:

  • State Attorney General's Office
  • Federal Trade Commission
  • Consumer Financial Protection Bureau

Remember, reporting debt collectors can help you protect your rights and prevent further harassment.

Stopping Debt Collectors

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If you're being harassed by debt collectors, you have the right to stop them from contacting you. You can send a written request called a "cease and desist" letter to the collector, and they have to stop contacting you except to tell you that they're ending communications or that they might or will sue you.

To get a debt collector to stop contacting you, you'll need to send a cease and desist letter. This letter should clearly state that you want the collector to stop contacting you, and it's best to send it via certified mail so you have proof it was received.

A cease and desist letter is not a magic solution that makes the debt disappear. The collector can still take legal steps to collect the debt, like filing a lawsuit against you.

Before sending a cease and desist letter, consider whether it's a good idea. If you're considering filing for bankruptcy, it might be better to let the collector continue contacting you, as the calls may stop once you file.

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If you do send a cease and desist letter, be aware that the collector might feel it has no other choice than to sue you. And, once you stop talking to the collector, you'll limit your access to information about what the collector is considering doing.

Here are some key things to keep in mind when sending a cease and desist letter:

  • You can send the letter via certified mail to ensure proof of delivery
  • The collector has to stop contacting you except to inform you of certain actions
  • The collector can still take legal steps to collect the debt
  • Sending a cease and desist letter might increase your risk of a lawsuit
  • Consider whether it's a good idea before sending the letter

Debt Collector Conduct and Restrictions

Debt collectors are required to identify themselves and notify you that they're trying to collect a debt, and in the initial communication, they must inform you that any information obtained will be used to effect collection of the debt.

They must also provide you with the name and address of the original creditor upon your written request made within 30 days of receiving the §1692g notice.

Debt collectors are prohibited from engaging in harassing conduct, such as communicating with you at unusual or inconvenient times or places, or contacting your relatives, employers, friends, neighbors, or others about your debt without your permission.

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Here are some specific examples of illegal conduct under the FDCPA:

  • Communicating with you at unusual or inconvenient times or places
  • Communicating with your relatives, employers, friends, neighbors, or others about your debt without your permission
  • Falsely representing the character, amount, or legal status of a debt
  • Using language or symbols on envelopes or postcards that indicate the debt collector is in the debt collection business or that the communication relates to the collection of a debt
  • Calling you at work if the collector knows or should know that your employer prohibits such calls
  • Using obscene or profane language, like racial slurs, insulting remarks, or threats of violence against you
  • Failing to disclose in communications that the collector is attempting to collect a debt
  • Calling you repeatedly with the intent to annoy, abuse, or harass you
  • Falsely stating or implying that any individual is an attorney or that any communication is from an attorney
  • Depositing or threatening to deposit a post-dated check before the date on such check
  • Threatening arrest, garnishment, or seizure of property or wages, unless such actions are lawful, and unless the collector fully intends to take such action
  • Collecting fees or charges the collector is not entitled to collect under the agreement creating the debt
  • Creating the false impression that the collector is affiliated with or is an agent of the government

Prohibited Conduct

Debt collector conduct and restrictions are in place to protect consumers from harassment and unfair practices. The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from engaging in abusive, unfair, or deceptive tactics when trying to collect from you.

Debt collectors cannot contact you at unusual or inconvenient times, such as early in the morning or late at night, unless you agree otherwise. They must assume that the times between 8:00 a.m. and 9:00 p.m. (in your time zone) are convenient.

Debt collectors are also prohibited from contacting your relatives, employers, friends, neighbors, or others about your debt without your permission. They can contact others about your debt, but only to locate you and can't talk about the debt.

Debt collectors must identify themselves and notify you in every communication that the communication is from a debt collector. They must also give you the name and address of the original creditor upon your written request made within 30 days of receiving the notice.

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Some examples of prohibited conduct by debt collectors include:

  • Communicating with you at unusual or inconvenient times or places
  • Communicating with your relatives, employers, friends, neighbors, or others about your debt without your permission
  • Using obscene or profane language, like racial slurs, insulting remarks, or threats of violence against you
  • Falsely representing the character, amount, or legal status of a debt
  • Depositing or threatening to deposit a post-dated check before the date on such check
  • Threatening arrest, garnishment, or seizure of property or wages, unless such actions are lawful, and unless the collector fully intends to take such action
  • Collecting fees or charges the collector is not entitled to collect under the agreement creating the debt
  • Creating the false impression that the collector is affiliated with or is an agent of the government

These are just a few examples of the many restrictions in place to protect consumers from debt collector harassment.

What Is a Limited-Content Message?

A limited-content message is a specific type of message a debt collector can leave on a consumer's voicemail. It's designed to be brief and to the point.

To qualify as a limited-content message, it must include a business name that doesn't indicate the collector is in the debt collection business. It must also ask the consumer to reply to the message.

A limited-content message should include the name or names of one or more natural persons the consumer can contact to reply. This is in addition to a telephone number or numbers the consumer can use to reply.

The message can also include a salutation, the date and time of the message, and suggested dates and times for the consumer to reply. It's even okay to include a statement that if the consumer replies, they may speak to any of the company's representatives or associates.

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Here are the key components of a limited-content message:

  • A business name that doesn't indicate the collector is in the debt collection business
  • A request that the consumer reply to the message
  • The name or names of one or more natural persons the consumer can contact to reply
  • A telephone number or numbers the consumer can use to reply
  • A salutation (optional)
  • The date and time of the message (optional)
  • Suggested dates and times for the consumer to reply (optional)
  • A statement that if the consumer replies, they may speak to any of the company's representatives or associates (optional)

Industry and Regulatory Information

The credit industry has raised concerns that the FDCPA has been used to file frivolous lawsuits and seek damages for minor technical violations, which has impeded their ability to collect valid debts.

Many in the credit industry and some courts have taken the stance that the FDCPA has often been used to file frivolous lawsuits and seek damages for minor technical violations. This has led to repeated lobbying of Congress to relax provisions of the law to reduce their civil exposure for these "hyper-technical" violations.

The FDCPA contains contradictions that often lead to liability on the part of collection agencies in civil cases, especially when dealing with technology that did not exist when the law was written. For example, the FDCPA requires a collection agency to identify itself as such in any communication with a consumer, but also prohibits them from disclosing the debt of a consumer to anyone else.

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The Federal Trade Commission (FTC) receives more complaints about debt collectors than about any other specific industry, with 125,136 consumer complaints about third-party debt collectors in 2012 alone.

The FTC has authority to issue formal opinions regarding debt collectors' conduct under the FDCPA, but the Dodd-Frank Wall Street Reform and Consumer Protection Act transfers authority for rule making to the new Consumer Financial Protection Bureau (CFPB) effective between January 21, 2011 and July 21, 2011.

YearNumber of Consumer Complaints
2011144,451
2012125,136

By the Industry

The credit industry has taken a stance that the FDCPA has often been used to file frivolous lawsuits and seek damages for minor technical violations.

Many in the credit industry believe that the FDCPA's strict liability nature has led to an increase in civil exposure for collection agencies.

The collections industry has lobbied Congress to relax provisions of the law to reduce their civil exposure for "hyper-technical" violations.

The accounts receivable management industry has raised concerns that the FDCPA contains contradictions that often lead to liability on the part of collection agencies.

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Collection agencies are required to identify themselves as such in any communication with a consumer, but also cannot disclose the debt of a consumer to anyone else.

This contradiction has resulted in third party disclosure violation issues, especially when a collector leaves a message on an answering machine or voicemail system.

Case law has tackled this issue but has not yet resolved it, leaving collection agencies in a difficult position.

Regulatory Agencies

The Federal Trade Commission (FTC) plays a crucial role in regulating debt collectors under the Fair Debt Collection Practices Act (FDCPA). The FTC receives more complaints about debt collectors than any other specific industry, with 125,136 consumer complaints in 2012 alone.

In 2013, the FTC reported a decrease in complaints from 144,451 in 2011, indicating a slight improvement in debt collector practices. However, this still represents a significant number of complaints.

The FTC has authority to issue formal opinions regarding debt collectors' conduct under the FDCPA, but this authority is now shared with the Consumer Financial Protection Bureau (CFPB). The FTC retains enforcement authority, but the CFPB takes over the FTC's advisory opinion function.

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The FTC has only rarely exercised its authority to issue advisory opinions, with only four such opinions issued through 2009. Good faith conformity with a formal opinion of the FTC constitutes a second statutory defense under the FDCPA.

YearNumber of Consumer Complaints
2011144,451
2012125,136

In March 2021, the CFPB issued its annual report to Congress on its implementation of the FDCPA, highlighting four actions against alleged FDCPA violations. Two of the cases were resolved with over $15 million in redress.

Frequently Asked Questions

How do you beat a third party debt collector?

To dispute a third-party debt collector, you can write a letter disputing the debt, dispute it on your credit reports, or seek professional help by hiring an attorney. Disputing a debt can be done within 30 days of receiving a collection notice, and it's essential to act quickly to protect your rights.

What happens if my account gets sent to third party collections?

Having your account sent to third party collections can significantly damage your credit scores and credit reports for up to seven years. Learn more about the consequences and how to protect your credit

Helen Stokes

Helen Stokes

Assigning Editor

Helen Stokes is a seasoned Assigning Editor with a passion for storytelling and a keen eye for detail. With a background in journalism, she has honed her skills in researching and assigning articles on a wide range of topics. Her expertise lies in the realm of numismatics, with a particular focus on commemorative coins and Canadian currency.

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